ITM probability

The figure is calculated from the option's own pricing, using the same inputs that produce its delta: strike distance from the current price, time to expiration, and implied volatility. A call struck well above the current price with weeks left to expire will show a low ITM probability; the same call with only a day left and the stock trading just below the strike will show a much higher one. It's a probability estimate baked into the option's price, not a separate calculation layered on top.

Premium sellers read ITM probability as a proxy for assignment risk: the lower the number, the further out-of-the-money the strike, the smaller the premium, but the higher the odds it simply decays to zero. It trades off directly against annualized return, since strikes with higher ITM probability, closer to the money, carry richer premium but a real chance of finishing against the seller. Screening on this figure typically means picking a threshold, say under 20% or 30%, then ranking by return within that filtered set, rather than chasing the single highest-return strike regardless of its odds.

ITM probability is a model output, not a guaranteed frequency. It assumes the underlying's future price moves are drawn from a roughly log-normal distribution around today's implied volatility, an assumption that holds reasonably well in calm markets and breaks down around earnings, news, or any sharp repricing of volatility itself. A strike modeled at 15% ITM probability the day before a surprise announcement can find itself deep in-the-money within hours, because the model had no way to price in an event nobody expected. It also says nothing about how far in-the-money a losing strike might finish, only whether it crosses the line at all, so two strikes with identical ITM probability can carry very different worst-case losses.

Suppose a stock trades at $91 and a trader is screening cash-secured puts at the $85 strike, 30 days out, showing an ITM probability of 18%. That means the model gives roughly an 82% chance the stock stays above $85 through expiration, letting the seller collect the full premium. Move the strike up to $88, closer to the money, and ITM probability might climb to 34%: richer premium, but a meaningfully higher chance of the stock finishing below it and the seller getting assigned shares near the top of a pullback.